Putnam Investments is faced with a loss of up to $15 million because it is involved with the insurer Conseco, which is on the verge of bankruptcy. The loss comes at a time when budgets in the fund industry are under review. It also reflects on some of the risks fund firms took during the Nasdaq boom in order to develop high-end products for affluent investors.

Conseco said Wednesday a bankruptcy filing could be near as it disclosed a $1.3 billion quarterly loss and said federal regulators were investigating its accounting, according to the Associated Press.

The potential hit to Putnam is large enough that it was included in Marsh & McLennan Companies' most recent Securities and Exchange Commission filing. Marsh is the parent company to Putnam Investments.

A Putnam spokesperson declined to comment for this story.

Putman is involved with Conseco through an equity interest in Thomas H. Lee Partners, whose Equity Fund IV holds a significant preferred investment position in Conseco's public stock.

In 1999, Putnam acquired an equity interest in Thomas H. Lee Partners and the general partner of Fund IV. The significant capital restructuring that may result from the actions announced by Conseco going bankrupt may adversely impact the value of Fund IV's investment in Conseco, and consequently the value of Putnam's investments related to Fund IV, according to the filing.

"Putnam is assessing the impact of this event on its investments in Fund IV, which could result in a reduction of pre-tax operating income (non-cash) in the range of $10-15 million in the third quarter," read the filing with the SEC. 

Stay ahead of the news ... Sign up for our email alerts now
CLICK HERE